These financial assets are repacked loans sold to investors on the secondary markets. CDO could include some combination of asset-backed securities (ABSs), including mortgages (commercial or residential), auto loans, credit card debt, or some other loan product.

Synthetic CDO (Synthetic Collateralized Debt Obligation). In contrast, synthetic CDOs employ non-cash assets as their underlying assets. These non-cash assets primarily consist of financial derivatives, such as credit default swaps (CDS), options, and various contractual agreements.

Key Takeaways. A collateralized loan obligation (CLO) is a single security backed by a pool of debt. CLOs are often corporate loans with low credit ratings or loans taken out by private equity firms to conduct leveraged buyouts.

Collateralized loan obligations (CLOs) are CDOs made up of bank loans. Collateralized bond obligations (CBOs) are composed of bonds or other CDOs. Structured finance-backed CDOs have underlying assets of ABS, residential or commercial MBS, or real estate investment trust (REIT) debt.